OT:RR:CTF:VS H303816 CMR
Mr. Anthony Krize
204 Spring Hill Road
Trumbull, CT 06611
RE: Incandescent string lights; Generalized System of Preferences
Dear Mr. Krize:
This is in response to your request on behalf of your client, H.S. Craft Manufacturing Corporation, for a country of origin ruling for incandescent string lights and a determination of whether the string lights qualify for preferential duty treatment under the Generalized System of Preferences (GSP).
FACTS:
The string light sets at issue consist of 16 styles using incandescent miniature lamps. You indicate that the manufacturing process and sets are identical in construction and nature, differing only by the color and total number of bulbs. Each item is comprised of a cord connector, electric wires, contacts, fuses, a lamp holder and lamp base, light bulbs and an Underwriters Laboratories (UL) label. All components are purchased from the Philippines except for (1) the light bulbs, (2) copper terminals, (3) plug and end connector parts, (4) polypropylene pellets, (5) ties for packaging, and (6) spare parts (spare lamps, fuses, etc.), which are obtained from China. The UL labels are from the United States.
The manufacturing process in the Philippines is described as follows:
Inserting Chinese-origin polypropylene pellets into an injection molding machine to produce lamp bases and lamp holders by melting the polypropylene and forming the components.
Dyeing the Chinese-origin bulbs, if needed, using paint of Philippine origin.
Connecting the bulbs to the lamp bases and lamp holders to make the lamps.
The Philippine-origin wire is cut to length and the Chinese-origin copper terminals are attached.
The light bulbs in lamp bases and lamp holders are assembled with the processed insulated wire to create incomplete light strings.
The incomplete light strings wires are twisted.
Terminals are connected to the ends of twisted wire and then the processed wire is connected to Chinese-origin plugs.
The completed string lights are bundled and tied with tie wires from China.
The string lights are tested, labeled with the UL labels from the United States and packed for shipment.
ISSUE:
Whether the various string light sets assembled in the Philippines of Chinese and Philippine components are eligible for duty-free treatment under the GSP.
LAW AND ANALYSIS:
Under the GSP, eligible products the growth, product, or manufacture of a designated beneficiary developing country (BDC) which are imported directly into the U.S. qualify for duty-free treatment if the sum of (1) the cost or value of the material produced in a BDC, plus (2) the direct costs involved in processing the eligible article in the BDC, is not less than 35 percent of the appraised value of the article at the time it is entered into the U.S. See Section 10.176(a), Customs and Border Protection (CBP) Regulations (19 CFR 10.176(a)).
As stated in General Note 4, Harmonized Tariff Schedule of the United States (HTSUS), the Philippines is a designated BDC. In addition, the string light sets at issue are classifiable under subheading 9405.30.00, HTSUS, which provides for “Lamps and light fittings . . .: Lighting sets of a kind used for Christmas trees. Articles classified under this subheading are eligible for duty-free treatment under the GSP provided that they are a "product of" Cambodia, are "imported directly", and satisfy the 35 percent value-content requirement.
The cost or value of materials which are imported into the BDC to be used in the production of the article, as in this case, may be included in the 35 percent value-content computation only if the imported materials undergo a double substantial transformation in the BDC. That is, the non-Cambodian components must be substantially transformed in Cambodia into a new and different intermediate article of commerce, which is then used in Cambodia in the production of the final imported article – the incandescent string lights. See Section 10.177(a), CBP Regulations (19 CFR 10.177(a)), and Azteca Milling Co. v. United States, 703 F. Supp. 949 (CIT 1988), aff'd, 890 F.2d 1150 (Fed. Cir. 1989).
The test for determining whether a substantial transformation has occurred is whether an article emerges from a process with a new name, character or use, different from that possessed by the article prior to processing. See Texas Instruments Inc. v. United States, 69 CCPA 152, 681 F.2d 778 (1982). In order to determine whether a substantial transformation occurs when components of various origins are assembled into completed products, CBP considers the totality of the circumstances and makes such determinations on a case-by-case basis. The country of origin of the item’s components, extent of the processing that occurs within a country, and whether such processing renders a product with a new name, character, and use are primary considerations in such cases. Additionally, factors such as the resources expended on product design and development, the extent and nature of post-assembly inspection and testing procedures, and worker skill required during the actual manufacturing process will be considered when determining whether a substantial transformation has occurred. No one factor is determinative.
In Headquarters Ruling Letter (HQ) 557796, dated June 3, 1994, this office considered the country of origin of Christmas tree light sets imported from Macau. As a part of the production of the light sets in Macau, the bulbs were formed from three-inch glass tubes, and the lamp bases and lamp supports (holders) were formed by injection molding.
In this case, as in HQ 557796, certain components are formed from plastic pellets into components of the light set. These plastic components, namely, the lamp bases, and lamp holders were substantially transformed into products of the Philippines as a result of the injection molding process performed in the Philippines. However, unlike the glass tubes made into bulbs in HQ 557796, the Chinese origin bulbs in this case retain their origin.
As in Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the bulbs have a pre-determined end-use as parts and components of the light set when imported into Cambodia and do not undergo a change in use due to the assembly process in Cambodia. As the string light sets at issue, produced as described herein, have not been determined to be a product of the Philippines, they are not eligible for duty-free treatment under the Generalized System of Preferences (GSP) program.
HOLDING:
The string light sets at issue are not products of the Philippines. With the exception of the lamp holders and lamp bases, which became products of the Phillipines through the processing of the Chinese-origin plastic pellets in the Philippines, the bulbs of the light set are not substantially transformed in the Philippines and retain their origin. Therefore, the light sets will not be eligible for preferential tariff treatment under the GSP.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a CBP field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy of this ruling, it should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation & Special Classification Branch